August 4, 2009

The US corn and soy crops showed solid growth last week, but development remains behind average, the government reported Monday (August 3).

 

The crops generally look strong, according to the US Department of Agriculture's crop-progress report, but their lagging development gives the market a reason to maintain some weather premium in the prices, an analyst said.

 

"The health of the crop seems to be good," said Joe Victor, vice president with Allendale. "The lagging maturity - both in the corn on the percent silked, as well on the soy, the percent bloomed - show we are not out of the woods just yet."

 

Conditions for the spring wheat crop slipped more than expected, but not enough to raise concerns about a crop that has looked strong throughout the season, the analyst said.

 

The USDA said that 68 percent of the crop was rated good-to-excellent, down from 70 percent the previous week. Traders had estimated a drop of 1-2 percentage points. The rating was 66 percent at the same time last year.

 

Talk of increased heat on the way in the US Corn Belt received some credit for Monday's rally in Chicago Board of Trade corn futures, but many analysts said that crop could use some heat because of the slow development, which remains behind schedule.

 

The USDA said 76 percent of the crop was silking, up from 55 percent the previous week but down from the five-year average of 89 percent. Last year, 79 percent of the crop was in the silking stage.

 

Victor said there are growing concerns about areas of the northern Corn Belt. The portion of the crop rated good-to-excellent in Wisconsin fell to 48 percent, down from 55 percent. Silking also is behind in Wisconsin and other states.

 

"It would appear that ND, SD, and WS are going to need to remain frost free until at least mid-October to prevent doing damage to at least one-half of their respective crop," Benson Quinn Commodities analyst Jon Michalscheck said in a market commentary.

 

The USDA said 14 percent of the crop was in the dough stage, up from 7 percent last week but down from the five-year average of 29 percent.

 

The soy-condition ratings exceeded expectations. The USDA said the portion of the soybean crop rated good-to-excellent was 67 percent as of Sunday, same as the prior week. Traders had expected conditions to drop by 1-2 percentage points.

 

As with corn, sluggish development, not the condition of the crop, remains as the concern for soy, Victor said.

 

The crop is behind the five-year average, though it has caught up to last year's pace.

 

The USDA said that 76 percent of the crop was in the blooming stage, up from 63 percent the prior week but down from the average of 86 percent   . Last year, 63 percent of the crop was in the blooming stage.

 

Victor said that while the portion of the crop blooming in Illinois jumped to 63 percent from 46 percent, it is still 26 percentage points behind the five-year average.

 

"This is not a good situation," Victor said.

 

Indiana, Wisconsin, Michigan and Minnesota also were well behind schedule, although Iowa, a key soybean producer, and Ohio were close to the average pace.

 

The government said 36 percent of the crop was setting, up from 20 percent the prior week but down from the average of 54 percent.

 

The USDA said 71 percent of the spring wheat crop was in good-to-excellent condition as of Sunday, down from last week's rating of 74 percent. That was a greater decline than traders expected - they were anticipating a drop of 1-2 percentage points - but Victor said that it isn't a reason for concern.

 

"The condition of that crop has been so strong," Victor said. "We've been running 15 to 20 percent higher than a year ago and the five-year average. It's about time seasonality starts to set in."

 

The crop has enjoyed the same moderate weather, with cool temperatures and adequate rainfall that has helped corn and soy crops.

 

The most notable shift was in Montana, where 37 percent of the crop was rated good-to-excellent, down from 52 percent the prior week.

 

The crop was 98 percent headed, up from 93 percent the prior week but down from the average of 100 percent.

 

The USDA said only 3 percent of the crop was harvested, down from the average of 15 percent. North Dakota hasn't started harvest but is usually 12 percent complete by now. Minnesota and Montana are similarly behind.

 

The government also showed that the winter wheat season is wrapping up. The USDA said that 85 percent of the crop was harvested, up from 79 percent the prior week but down from the five-year average of 90 percent.